Another Tax On Food? Enough Is Enough!

Michael Sanson

In the April issue, I wrote about a recent Federal appeals court decision that reversed the dismissal of a suit against McDonald's for allegedly contributing to the obesity of its customers. I suggested that this frivolous suit and others like it would pose problems for everyone in foodservice. Apparently there are too many unscrupulous people who believe the restaurant-industry is an easy target with deep pockets.

Another highly publicized example of this point surfaced in the last few months when a woman claimed she was served a bowl of Wendy's chili containing a human finger. She was recently arrested for fraud, but not before the chain's revenues were damaged and it became the subject of late night talk show jokes.

Now, there's word out of Detroit that Mayor Kwame Kilpatrick has submitted a budget that seeks to impose a 2% fast-food tax that would raise $17 million in the next fiscal year to help offset the city's $300 million budget deficit. Kilpatrick says consumers will barely notice the tax, which would cost, for example, another 5 cents on a Big Mac. A vote on this proposal could come by the end of the month.

Once again quick service is a target, and once again full service cannot look the other way. If you examine this proposal you have to wonder, "What do they mean by fast food?" McDonald's and Wendy's would obviously be subjected to this new tax, but what about pizza and Chinese places that do takeout, or how about Applebee's, Chili's, Outback and other full-service restaurants that offer curb-side pickup service? How about the fast-casual segment?

There are so many other problems with this proposal, which some are labeling a "fat tax." First, Detroit consumers are already paying a 6% state sales tax on restaurant meals. Second, it discriminates against the poor, whose dining-out choices are limited. Third, this tax singles out one segment while the rest of the industry is off the hook.

This last point will likely be the subject of a heated debate, with some arguing that if the city is going to impose an additional 2% tax on restaurant meals, it should apply to all restaurant meals.

Detroit's Deputy Mayor Anthony Adams says this won't happen because Mayor Kilpatrick is proud that 22 full-service restaurants have opened downtown in the last three years. The mayor won't do anything to break that momentum, he says. The city's QSR sector, on the other hand, is "mature" enough to bear the tax. City Council, however, not the mayor, will decide if and how the tax will be levied.

The National Restaurant Association, which has described this industry as the cornerstone of the nation's economy, has voiced its objections to this proposed tax. And it should. Restaurants are expected to have an overall economic impact of $1.2 trillion this year while employing 12.2 million people. This is a huge contribution to the U.S. economy, yet restaurants find themselves constantly defending themselves against a barrage of assaults.

If this tax passes in Detroit, look for other cities to jump on board with similar proposals. It's time to draw a line in the sand. Enough is enough.